If Morningstar awards 5 stars, this means that the portfolio is among the top 10 per cent in its category, whilst 1 star indicates that the portfolio is among the bottom 10 per cent.
LD Shares & Bonds, which accounts for just over 90 per cent of LD Discretionary, has consistently ranked at the very top with 5 stars in most months over a period of several years. This places it in the top decile.
Morningstar uses at least three years’ of historical data when assessing individual portfolios.
Morningstar assesses the portfolios in The Cost-of-Living Allowance Fund on the same basis as it assesses comparable investment products in Europe. This means, amongst other things, that the portfolios can be compared with several hundred investment fund sub-funds offered by Danish investment funds.
-
Morningstar assesses the funds based on a number of criteria relating to return, risk and costs, and awards them between 1 and 5 stars depending on how well each fund has performed. The rating is a weighted average of the portfolio’s performance over three- and five-year periods and is updated by Morningstar once a month.
-
Each fund is categorised, based on its investment universe, into a group of comparable European funds. Returns are analysed over a minimum period of three years, supplemented where possible by returns over five and ten years. Long-term returns are given greater weight than short-term returns.
Allocation of portfolios at Morningstar
Morningstar carries out a monthly rating of the portfolios, awarding up to five stars based on the distribution of the portfolios within each group, as shown in the figure below.
A top rating of five stars therefore means that the portfolio is ranked in the top tenth, which must be regarded as highly satisfactory. Four stars can be described as very satisfactory, whilst three stars are satisfactory.
